3 Tips for Securing a Second round of Funding for Your Startup

By: Social Monsters

08/22/2014

When you first launched your startup, you might have been happy to accept funding help from just about anyone. Getting a small business open and running can take a lot of blood, sweat and tears—not to mention capital—so when Great Aunt Betty wrote you a check you were more than happy to take it.

Now that you’ve been open for business for awhile, it’s probably time to think about arranging for a second round of funding. As opposed to first round funding that helped you to launch your startup and getting everything going, second round financing is ideal for established companies that are ready to expand their inventory and their client base. The following tips can help you to secure a second round of funding for your company.

Look for investors who are familiar with your product and services. When you are looking for investors to approach and ask about funding your established company, look for people who are familiar with your type of startup and the goods and services you are providing. If you own a small website designing firm, focus on searching for people who know this type of service inside and out and can be a true partner to what you are doing. To help create a list of potential investors to speak with, take a look at the ones you spoke with when you were first opening your company who passed on the opportunity to help and consider contacting them again. If you spoke with someone a year ago who seemed very interested in investing in your startup but then the transaction fell through, reach out to them again. Keep in mind that it is important to set aside time for fundraising, don't let seeking funding take over your life, or business. Be prepared to hear "no," and don't let it cripple your motivation.

Make sure you have a solid business plan in place. Trying to secure a second round of funding for your startup is a lot like heading to the bank and asking for a loan. You need to have a well-thought out and organized business plan in place, notes Startup Loan. The plan should clearly illustrate that your first business plan has come to fruition very nicely and that your startup is doing well overall and is steadily attracting new customers. In other words, you want to try to show on paper just how amazing your startup is, and how your business plan has helped to achieve that. You should also include information about return on investment projections, which will also help to illustrate why investing in your established business is a great idea, according to Entrepreneur. In order to get an accurate handle on your current sales—which will in turn help to predict future sales—consider working with a company like InsightSquared. Their software reporting tools will help you to analyze your current sales as well as forecast future performance. This will give potential investors the in-depth information about your financial situation that they will need to decide if they will offer funding.

Get ready to talk about the future. While you might want to focus on the successes that your startup has already achieved when speaking with potential investors, it’s also a good idea to talk about the future. Investors will want to know how their money will help your company both now and down the road, so prepare a presentation that talks about any expansion plans—both in terms of products and services, staff or location. In some cases, second round investors will be more willing to offer funding if you can show that your startup is growing nicely and that customers want what you are offering.